India is re-negotiating the terms of long-term gas contract with Qatar to reflect the slump in global energy rates but no binding agreement has been signed so far.PTI | Updated: December 22, 2015, 09:06 IST

Qatar's minister of energy and industry Mohammed Bin Saleh Al-Sada speaks to journalists.NEW DELHI: India is re-negotiating the terms of long-term gas contract with Qatar to reflect the slump in global energy rates but no binding agreement has been signed so far, Oil Minister Dharmendra Pradhan said today.

Petronet LNG Ltd (PLL), India's biggest gas importer, is in talks with RasGas to rework pricing formula after liquefied natural gas (LNG) under the existing 25-year contract coming for double the rate available in spot or current market.

"PLL is in talks with RasGas Company of Qatar to re-negotiate the terms of long-term gas agreement. However, no binding agreement has been executed so far," he said in a written reply to a question in Lok Sabha here.

Pradhan said PLL has a contract to buy 7.5 million tonnes a year of LNG from RasGas on a long-term contract that ends in April 2028.

Officials said the revised price has been in-principle agreed between the two and will help cut the rate by about half to $6-7 per million British thermal unit.

The revised formula will base the price on a three-month average price of Brent crude oil, replacing a five-year average of a basket of crudes imported by Japan, on condition that PLL buys an additional 1 million tonnes of LNG annually.

The trailing three month average Brent price is about USD 48 a barrel, while the average of Japan Crude Cocktail for the five-year period ended September 30 was USD 100.

Credit Suisse, in an equity research note earlier this month, said PLL is 'under-lifting' LNG from RasGas by 32 per cent and is seeking to re-open the price formula, outside of a contractual price review. "This act appears a clear challenge to LNG contract sanctity," it said.

The value of the underlifted cargoes in 2015 is USD 1.5 billion and if the change to price formula was implemented it would suggest a USD 2.5 billion buyer saving over three years.

"In either case, the act of under-lifting to force a price change would set an as yet unseen precedent," it said.

Credit Suisse said PLL's contract is a 100 per cent take or pay agreement where the price formula is not subject to a price review.

Officials said PLL is also seeking waiver of $1.5 billion penalty for under-lifting the contracted volume.

PLL is taking only 68 per cent of the volumes it agreed to in 25-year contracts with RasGas after a slump in global energy prices led to gas being available in spot or current market at roughly half that rate.

As per the new deal being negotiated, PLL will take the quantities it did not take this year during the remainder of the contract period.

State-owned GAIL India Ltd, Indian Oil Corp (IOC) and Bharat Petroleum Corp Ltd (BPCL) have committed to buy all of the 7.5 million tonne a year of LNG that Petronet is to import from Qatar. But with slump in global prices, they have opted to buy gas from spot market rather than use the long-term LNG.

The price of delivered spot LNG delivered has tumbled more than 50 per cent in the past year to about $6.80 per million Btus.